Prediction Markets

A prediction market lets people buy and sell contracts on the outcome of a future event — an election, a central bank decision, a ceasefire or a product launch. Each contract pays out if the event happens and is worth nothing if it does not.

Prices as probabilities. Contracts trade between 0 and 100 cents. A price of 65 cents means the market as a whole puts the chance of that outcome at roughly 65%. As new information arrives, traders buy or sell and the implied probability moves.

Markets versus polls. Polls measure what people say they will do. Prediction markets reflect what traders are willing to put money on, and they update continuously rather than once a week. Neither is always right — markets can be thin or swayed by large traders, and polls can miss late shifts.

Why macro traders watch them. Odds on elections, rate decisions and conflicts give a quick read on how likely an event is seen to be, which helps when judging how much of that outcome is already priced into stocks, bonds or currencies.

What to check. Look at trading volume alongside the odds. A probability backed by heavy volume is generally more reliable than one set by a handful of trades. Always read how a market will be resolved before relying on it.